Essar Power looks to be in profit this fiscal

MUMBAI: Essar Power, part of the $27-billion Essar Group, is on the cusp of a turn around, thanks to falling coal prices. Essar Group, owned by billionaire brothers Shashi and Ravi Ruia, entered the power business in 1997 and has presence in thermal, gas and solar energy with a total capacity of 3,685 MW in India and Canada.

The energy arm with a large play in coal-fired power stations, has been benefiting from declining coal prices__a key raw material used to generate electricity, thus narrowing its losses. Most of Essar Power's plants have turned from red to black. For instance, its Salaya unit in Gujarat reported a profit of Rs 39 crore in fiscal 2016 as against a loss of Rs 684 crore in fiscal 2015 while its Paradip plant in Odisha made an operating profit of Rs 129 crore in the last fiscal.

"If coal prices and other variables remain stable, Essar Power, at the consolidated level, should become profitable in the current financial year," said its executive vice-chairman Sushil Maroo. From a peak of $120 a tonne in 2008, coal prices are now trending at $53 levels.

Maroo's immediate priority is to pare debt of about Rs 20,370 crore and improve operational efficiencies. Describing this leg of the company's journey as a trouble-shooting phase, Maroo said, "We have gone through a lot of trouble in the past several years. We want to stabilize operations and don't want to add any more debt." The company has restructured its debt under the Reserve Bank of India's 5/25 scheme that allows loans to be extended to 25 years and terms to be reset every five years, aiding Essar Power to match debt repayments with that of the cash flow of the projects.

Essar Power said that the government's move to provide 24x7 electricity by 2019 will boost demand in the country where per capita electricity consumption stood at 1010 kilowatt-hour in 2015.

Maroo said the company's 1,200 MW Mahan power unit in Madhya Pradesh, which was shut for 19 months after the Supreme Court cancelled its coal mine, has resumed operations in April. Essar Power has been ensuring a steady availability of coal at Mahan through the e-auction procurement route. Maroo also added that the Tori power plant in Jharkhand will be operational by 2018-19.

“To save the environment and to fight climate change, my government has planned a major campaign. By 2022, we want to generate 175 GW of renewable energy. In the last three years, we have already achieved 60 GW or around one-third of this target,” he said.